The logo of the German bank Hypo Real Estate in Berlin. Photograph: Michael Gottschalk/AFP/Getty images

Two European governments last night helped shore up the continent's banking system as the contagion of banking failure swept across the Atlantic to engulf Germany, Italy, Belgium and Iceland and threatened to destabilise markets today.

Then it emerged that Belgium's makeshift government under Yves Leterme had helped broker a deal to secure the future of Fortis, the country's second-biggest bank, by selling 75% of its Belgian operations to BNP Paribas. France's biggest bank is also taking over two-thirds of Fortis's Luxembourg business.

Less than a day after the EU's top four leaders agreed that no sound bank would be allowed to go under but rejected a US-style bail-out plan, crisis talks began early in the capitals of the four countries and continued all day.

In Iceland, the government was still spearheading talks late last night with Nordic central bankers on a €10bn capital injection into the island's commercial banks, including leader Kaupthing, while in Italy Unicredit, the country's second-biggest bank, negotiated a fresh capital injection of up to a reported €6bn.

The scale of the contagion had been highlighted by Chancellor Angela Merkel, who led opposition to French ideas for a pan-European bail-out plan, when she said Germany would not allow one bank's distress to poison the country's entire banking system. HRE, with links to Ireland's Depfa and Dexia, a Franco-Belgian municipal lender bailed out last week with a €6.4bn injection, was a key player in the €900bn property bond market.

The German finance ministry said last night that HRE had been saved with no extra burden to the taxpayer, an extra €15bn credit facility being provided in the main by commercial banks.

Merkel and Peer Steinbrück, her finance minister, had earlier flayed the bank's board for disclosing a huge new liquidity hole, and other banks originally due to support it for pulling out. Both leaders insisted that the management of threatened banks could be made to pay for their costly mistakes with sanctions.

After an emergency summit of the EU's British, French, German and Italian leaders in Paris on Saturday, President Nicolas Sarkozy said executives and shareholders would be "punished" if states were forced to bail out their institutions by pouring in billions of capital and liquidity.

In Brussels, according to Luxembourg government sources, Leterme secured a last-minute deal to save Fortis. Last weekend Fortis, which over-reached itself last year by paying €24bn for key parts of Dutch rival ABN Amro, was bailed out with a €11.2bn injection from Belgium, Holland and Luxembourg in a partial nationalisation.

But money haemorrhaged out of the bancassurer, with the Dutch government on Friday taking full control of its Dutch business, including ABN, and leaving the Belgian rump exposed to investor panic.

On Saturday the four EU leaders insisted it was up to national governments to solve their countries' banking crisis but the potential cross-border effects of national decisions would have to be taken into account, with rescue efforts coordinated. The scale of the crisis in individual countries appeared to have undone that collective will.